Swiss Regulator Seeking Increased Authority

The Swiss Financial Supervisory Authority (FINMA) would like new competencies that would allow it to name and shame banks that breach its rules, according to the regulator’s chief executive.

Stefan Walters told Swiss newspaper NZZ that the ability to publicly reprimand financial institutions would have a disciplinary effect as banks would be aware of an added reputational risk.

The proposed change comes amid FINMA’s demand for increased powers ever since it received backlash for its handling of the collapse of Credit Suisse last year.

In March 2023, Switzerland’s second-largest bank, Credit Suisse, collapsed and was bought by rival UBS for 3 billion CHF (USD $3.3 billion), sparking fears of global bank failures.

FINMA received criticism and was later sued by Credit Suisse investors after the regulator approved a move to wipe out $17 billion worth of bonds as part of the takeover by UBS.

Since the collapse, FINMA has sought to ensure that bank risks are identified earlier and grievances are remedied quickly because “the earlier you recognize a problem, the more effective you are.”

However, the regulator requires banks to be more forthcoming with information to achieve this.

Walters said:  “An important principle is: no surprises. I expect a financial institution to proactively inform me of any developments that are material to the stability of the institution. I demand complete and unfiltered access to all information.”

If banks refuse to cooperate and be transparent with the regulator, Walters said the regulator would like the authority to use tougher supervisory methods, such as more on-site checks.

In more extreme cases, the regulator wants to be able to hold individual people accountable and, if necessary, remove them.

Walters added:  “It is not a question of starting a feud, but of the question of what framework conditions the supervisory authority needs to ensure the stability of the institution. My focus is that taxpayers do not have to step in to save an institution in crisis.”